Senators Lathrop and Mello introduced legislation to amend the Nebraska Construction Prompt Pay Act in Legislative Bill 373.  A copy of the bill can be found here.  The main changes include:

  • A definition of substantially complete is added and is defined as the state of a construction project when the project is sufficiently complete in accordance with the contract to be used for its intended purpose.
  • A limit on the level of retainage is added, limiting retainage to 5% of the total contracted and improvement costs.
  • A contractor bringing a claim under the Prompt Pay Act may be awarded reasonable attorney’s fees and costs.

These are significant changes to the Prompt Pay Act. From a collections standpoint, the opportunity to recover attorney’s fees will significantly change the landscape for contractors seeking payment. At present, the only way to recover attorney’s fees is to foreclose on your construction lien. The decreased limit on retainage, which by contract is usually ten percent, will likely receive mixed reviews. If it’s your own retainage, the change is great. But, if it’s the retainage you can withhold from your subcontractors, the change may require you to monitor the job that much more closely to make sure you have enough money to cover the subcontractor’s deficiencies.

We will monitor these amendments as they meander through the legislature.